Guess shares jumped after the apparel company reported a quarterly profit that far exceeded expectations helped by robust expansion overseas.

Other retailers also rallied ahead of the holiday shopping season including Wal-Mart , Target and Costco . This year, more big-box retailers will begin their Black Friday sales earlier than ever Friday morning, and more are starting to open on Thanksgiving Day.

European shares bounced back from six-week lows, although worries about debt levels in peripheral euro zone countries kept investors nervous. Ireland set out its four-year planto make 15 billion euros in savings to bring down its record deficit.

Also, Ireland is set to part nationalize one if its key financial institutions, Bank of Ireland . S&P downgraded Ireland's rating to A from AA- late Tuesday.

Treasury prices tumbledafter the government auctioned $29 billion of 7-year notes, which had a yield of 2.253 percent and a bid-to-cover ratio of 2.63.

Among this morning's heavy day of economic news, the number of people applying for unemployment benefits fell sharply last weekto the lowest level since July 2008, a hopeful sign that improvement in the job market is accelerating. The Labor Department said that weekly unemployment claims dropped by 34,000 to a seasonally adjusted 407,000 in the week ending Nov. 20, while analysts expected a much smaller drop.

Meanwhile, new U.S. single-family home sales dropped unexpectedly in Octoberand prices dropped to a seven-year low, according to the Commerce Department, pointing to sustained weakness in the housing market following the end of a home-buyer tax credit.

Also on the housing front, U.S. mortgage applications rose to their highest level in more than six months last week, according to the Mortgage Bankers Association.

Homebuilders were mostly higher across the board, with Lennar , Pulte and Toll Brothers up almost 3 percent each.

New orders for U.S. manufactured goods unexpectedly fell in October to post their largest decline in nearly two years and business capital spending plans dropped, according to the Commerce Department that pointed to a slowdown in factory activity.

Consumer spending rose for a fourth straight month in October and a key inflation gauge was at a record low, according to the Commerce Department, strengthening the Fed's defense of its decision to loosen monetary policy further.

And consumer sentiment rose to its highest level since Juneon tentative signs of improved job conditions and early discounts from retailers.